56 Cal.App.5th 13
Cal. Ct. App.2020Background
- Kramer sued Traditional Escrow, Inc. and Annette Scherrer‑Cosner for commissions and wage‑and‑hour claims; initial complaint identified a $20,030.90 commission and asserted other wage claims and PAGA/UCL relief.
- Defendants answered, their counsel (Miller firm) withdrew; withdrawal order listed Cosner’s home, phone, and email as the address of record. Defendants thereafter largely ceased participating and did not file a change‑of‑address as required by court rules.
- Kramer obtained ex parte leave to file a First Amended Complaint that quantified damages (seeking over $1.75 million). Kramer served the amended complaint and the signed order on the addresses of record; USPS tracking shows delivery to those addresses.
- Defendants did not respond; plaintiff requested entry of default and the court entered default and later entered a default judgment of about $1.617 million. Kramer recorded judgment liens.
- Defendants later filed a motion to set aside the default and vacate the judgment under the court’s equitable powers, alleging extrinsic mistake (lack of notice of the amended complaint) and extrinsic fraud (plaintiff’s counsel misled Cosner’s divorce attorney that defendants were in default). The trial court granted relief; Kramer appealed.
- The Court of Appeal reversed: it held equitable relief is reserved for exceptional circumstances, and defendants’ own negligence (failure to update address, check mail/voicemail, or act after receiving notice via a signed stipulation) barred relief and showed lack of diligence.
Issues
| Issue | Plaintiff's Argument (Kramer) | Defendant's Argument (Traditional/Cosner) | Held |
|---|---|---|---|
| Whether the trial court abused its discretion in granting equitable relief (vacating default and judgment) | Relief was improper because defendants’ default resulted from their negligence and lack of diligence, not exceptional circumstances | Equitable relief warranted because extrinsic fraud and extrinsic mistake prevented defendants from defending | Reversed — trial court abused its discretion; no exceptional circumstances shown |
| Whether defendants suffered extrinsic mistake (lack of notice of the First Amended Complaint) | Kramer: defendants had constructive and actual notice; their failure to receive actual notice was due to their own failure to notify the court of address changes and to check mail/voicemail | Defendants: they did not receive the amended complaint because they changed PO boxes and were unaware after counsel withdrew | Held for Kramer — defendants’ negligence (failure to update address, check mail) caused lack of notice; extrinsic mistake unavailable |
| Whether extrinsic fraud occurred (misrepresentation by Kramer’s counsel to Cosner’s divorce attorney) | Kramer: even if a misrepresentation occurred, defendants’ negligence allowed it and there is no causation showing the misrepresentation prevented defense | Defendants: counsel told Cosner’s divorce lawyer they were in default and could not respond, inducing inaction | Held for Kramer — substantial evidence supports that a misrepresentation may have occurred, but defendants’ negligence and lack of causation preclude relief |
| Whether defendants acted with diligence in seeking relief | Kramer: defendants waited months after notice/default and thus lacked diligence | Defendants: they acted reasonably after learning of the judgment/misrepresentation | Held for Kramer — defendants failed the diligence prong (delay from November 2018/December 2018 to August 2019) |
Key Cases Cited
- Rappleyea v. Campbell, 8 Cal.4th 975 (Cal. 1994) (equitable relief from default judgment is limited to exceptional circumstances and requires a three‑pronged showing)
- Manson, Iver & York v. Black, 176 Cal.App.4th 36 (Cal. Ct. App. 2009) (§473(b) six‑month period runs from entry of default; timing rules for relief)
- Estate of Carter, 111 Cal.App.4th 1139 (Cal. Ct. App. 2003) (trial court factual findings on extrinsic fraud reviewed for substantial evidence)
- Cruz v. Fagor America, Inc., 146 Cal.App.4th 488 (Cal. Ct. App. 2007) (constructive notice and internal mishandling do not justify equitable relief absent adequate excuse or diligence)
- McClain v. Kissler, 39 Cal.App.5th 399 (Cal. Ct. App. 2019) (failure to notify court/parties of address change can bar relief from default)
- Sporn v. Home Depot USA, Inc., 126 Cal.App.4th 1294 (Cal. Ct. App. 2005) (extrinsic fraud requires that the fraud prevented presentation of a defense and that causation be shown)
- Haraguchi v. Superior Court, 43 Cal.4th 706 (Cal. 2008) (abuse of discretion review explained: facts for substantial evidence, law de novo, application of law to facts for arbitrary/capricious review)